Comparison shopping

The Obama administration's draft of standardized forms to help Americans compare health plans drew praise from supporters of the federal healthcare overhaul. Advocates for insurers and businesses, though, say the burden of creating the forms may outweigh the benefits to consumers.

Proposed rules issued last week by HHS and the labor and treasury departments would require that health insurers provide prospective beneficiaries with standardized information about policies, beginning in March 2012, under a provision of the Patient Protection and Affordable Care Act.

The regulations would require an eight-page template of information on each type of insurance plan offered that includes comparable information similar to the federally mandated nutrition labels on many foods.

“The idea is that the more informed the patient is, the better the decision that he or she can make,” CMS Administrator Dr. Donald Berwick said during a media conference call. “Many times people will make decisions on coverage and not understand what they are going to get until they are sick.”

The proposed summary of benefits and coverage also would include a uniform glossary of common insurance terms, as well as coverage examples to illustrate costs to patients under each plan for three common benefit scenarios: having a baby, treating breast cancer and managing diabetes. Regulators may add more scenarios in the future, according to federal officials.

Supporters of that law said the information was needed to counter the practice of insurers releasing only “selective details” on their plans before purchase that leaves consumers with an incomplete understanding of the specific benefits and limitations of the policy.

“In the past, explanations of benefits have often been long, confusing and written in legal gobbledygook that no one could understand,” Ron Pollack, executive director of Families USA, a staunch advocate of the federal healthcare law, said in a written statement. “Deciphering basic information about health insurance plan benefits could be as challenging for consumers as learning a new language—without a good translation dictionary.”

Also, the proposed plain-English benefit descriptions could encourage competition in the health insurance marketplace, according to federal officials and advocates, by easing comparison shopping for consumers.

America's Health Insurance Plans, an industry trade group, did not dispute the benefits of clear descriptions but warned that they will add one more burden to a healthcare system already struggling to contain costs.

“The benefits of providing a new summary of coverage document must be balanced against the increased administrative burden and higher costs to consumers and employers,” AHIP spokesman Robert Zirkelbach said in a written statement.

For example, he noted, it will probably require most large employers that customize the benefit packages they provide to their employees to create tens of thousands of versions of the new document. The practical effect would add administrative costs “without meaningfully helping employees” because similar information already is provided.

The insurers' objections were echoed by Helen Darling, president and CEO of the National Business Group on Health, a not-for-profit representative of the nation's largest employers, which insure more than 50 million workers. “It's going to be very hard and probably costly,” Darling said in an interview.

Companies will probably have to spend “millions of dollars” to meet the new standards that few employees may even notice, she said. Her member companies already provide detailed and updated information on their insurance offerings every year during open enrollment periods, but the specific design of the federal requirements will necessitate major changes.

“I don't think the average American pays that much attention to this,” Darling said. “As benefits people, we wish they did; we can't even get them to open their benefits packets.”

Self-insured companies will likely face similar requirements under expected modifications to the proposed rules, said Daniel Maguire, director of the Office of Health Plan Standards and Compliance Assistance at the Labor Department.

The overall cost of the new requirement remains unknown, according to CMS officials and the National Association of Insurance Commissioners, which recommended the specific design and requirements included in the proposed rule.